American opportunity tax credit

Colleges and Universities A-Z James Madison University
1

<p>For anyone who has a SENIOR taking College classes or a FRESHMAN in COLLEGE--Check out the AMERICAN OPPORTUNITY CREDIT new this year. It is better than the Hope credit. Can get back 100% up to $2,000 (laptops, books, tuition, etc.). My son is a high school sr. and we are getting back 100% of his dual enrollment tuition and books. I did TurboTax and it did not put this tuition in the correct place, and now I have to amend it to go into the American Opportunity Credit section (was on phone with IRS for hour last night). Here is the official blurb off IRS.gov:</p>

<p>The American opportunity tax credit, which expanded and renamed the already-existing Hope credit.</p>

<p>Under the American Recovery and Reinvestment Act (ARRA), more parents and students will qualify over the next two years for a tax credit, the American Opportunity Credit, to pay for college expenses.</p>

<p>The American Opportunity Credit is not available on the 2008 returns taxpayers are filing during 2009. The new credit modifies the existing Hope Credit for tax years 2009 and 2010, making the Hope Credit available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.</p>

<p>The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. The credit is phased out for taxpayers with incomes above these levels. These income limits are higher than under the existing Hope and Lifetime Learning Credits.</p>

<p>Q2. The Hope credit originally applied only to the first two years of college. Has that changed?</p>

<p>A. Yes. The American opportunity tax credit can be claimed for expenses for the first four years of post-secondary education.</p>

<p>Q3. How much is the American opportunity tax credit worth?</p>

<p>A. It is a tax credit of up to $2,500 of the cost of qualified tuition and related expenses paid during the taxable year. That is a $700 increase from the previous Hope credit.</p>

<p>Q4. What education expenses qualify for the American opportunity tax credit?</p>

<p>A. The term "qualified tuition and related expenses" has been expanded to include expenditures for "course materials." For this purpose, the term "course materials" means books, supplies and equipment needed for a course of study whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance.</p>

<p>Q6. How is the American opportunity tax credit calculated?</p>

<p>A. Taxpayers will receive a tax credit based on 100 percent of the first $2,000 of tuition, fees and course materials paid during the taxable year, plus 25 percent of the next $2,000 of tuition, fees and course materials paid during the taxable year</p>

<p>Q10. How is the credit claimed?</p>

<p>A. The credit is claimed using Form 8863, attached to Form 1040 or 1040A.</p>

<p>Q11. I'm just beginning college this year. Can I claim the American opportunity tax credit for all four years I pay tuition?</p>

<p>A. The American opportunity tax credit is for amounts paid in 2009 and 2010 only. You may be eligible for the lifetime learning credit for any tuition and fees required for enrollment you pay after 2010.</p>

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<p>Yes, I found out about this credit, for which I can actually apply this year since the income levels are higher than for Lifetime credit, but I can’t believe that I actually would get a 2800 refund, there has to be something I am doing wrong, since the way I calculated the Lifetime, we only can claim $400 of the total expenses. </p>

<p>As I calculated it, if I claim 4000 in expenses for the AO act, I can get the 2800 refund. If instead I claim the Lifetime credit, which has a cap of 2000 and I have to multiply that by .20 which gives me a tentative credit of $400. Then that amount gets multiplied again by .300 for a credit of $120?? The lifetime credit seems so little compared to the other credit I think I must be doing something wrong when calculating the American Op credit. Then, if I claim the Tuition Deduction of 4000, my refund is $971. So, in summary, taking the Tuition deduction gives me a $971 refund, the Lifetime Credit gives me $490 refund (because the credit is only 120) and the American Op credit gives me $2870(credit is 2500). It is hard to believe the huge difference. ANyone else had the same results?</p>

3

<p>I couln’t quite follow your math - but in most cases - the American Opportunity credit of up to $2500 is the way to go. It is good for 2009 and 2010 and is more generous than anything else previously in place. </p>

<p>The FA forum has had many threads on this if you do a search.</p>

4

<p>“The American opportunity tax credit can be claimed for expenses for the first four years of post-secondary education.”</p>

<p>This may be a stupid question, but does “the first four years of post-secondary education” refer to calendar years or student years (as in fresh/soph/junior/senior)? My son is in year five of college - still a couple of courses short of his bachelor’s degree. He usually attends full time but there have been a few half-time quarters. We used the Hope Credit for years 1 & 2 and the Lifetime Learning Credit for years 3 & 4. I’m assuming that we can’t use the American Opportunity Credit because he has gone beyond 4 years of college attendance. Does anyone have a definitive answer on this?</p>

5

<p>that is actually a good question, especially since the 5th yr is not post graduate education, or is it a BA/MA combo? if it is then the 5th yr is definitely post grad studies for MA, but I am not sure how it applies, I would call the IRS tax helpline. post an answer if they give you one!</p>

6

<p>Can anyone speak to how use of a 529 Plan affects this?</p>

7

<p>humm. how can it be claimed for 4yrs of education if the answer to the above question is: “The American opportunity tax credit is for amounts paid in 2009 and 2010 only. You may be eligible for the lifetime learning credit for any tuition and fees required for enrollment you pay after 2010.” That sounds like two yrs of education to me. Unless it is going to be extended? They just came up with this credit to be applied for 09 and 2010 but is for 4 yrs of undergrad education. Can someone clarify this? I must be in a duh day today.</p>